State injects further €250m into EBS

THE GOVERNMENT confirmed yesterday that it has injected a further €250 million into the EBS to ensure the building society meets its capital requirements.

The further recapitalisation, which is in the form of a promissory note, represents almost a third of the €775 million the Government pledged to the EBS if private investment was not forthcoming. The promissory note follows on from the €100 million cash injection given by the Government last month.

The EBS needs €875 million to meet the core equity ratio of 7 per cent set by the Financial Regulator.

The further recapitalisation of the EBS by the State came as the building society opened a data room to assist in the due diligence process for interested parties ahead of its July 2nd deadline for prospective offers. The Department of Finance said that “every effort is being made to progress talks on private investment” by the start of July.

Meanwhile, Irish Life & Permanent (IL&P), which is seeking to negotiate with the EBS on a possible amalgamation, received a boost yesterday as Deutsche Bank advised investors to buy shares in the company and expressed confidence that IL&P would play a central role in the proposed “third force” in Irish banking.

IL&P, whose share price has underperformed in recent weeks, closed 5.5 per cent higher yesterday. The positive note followed a downgrade from rating agency Standard Poor’s last week which revised IL&P’s outlook to “negative” from “stable”.

In its detailed research note yesterday, Deutsche Bank said that the current market view on IL&P is overly negative and that the market is taking “a worst-case view”.

The investment bank set a target share price of €2.90 assuming a one-third chance that the third force initiative is a success.

IL&P needs to raise an estimated €900 million capital to cover losses from its banking unit, Permanent TSB, which it hopes to spin off. The banking and pensions group has indicated its intention to raise €700 million of this from its shareholders.

The Financial Regulator is to commence its assessment of the capital required by IL&P within weeks, a process which will take place over several months.